State aid compliance. What is it and why should I be interested?

In a nutshell, to receive grant funding from the UK government companies must demonstrate compliance to state aid guidelines.

But what does this mean?

Grant funding cannot be used to support companies ‘undertaking in difficulty’.

This is the case when deduction of accumulated losses from reserves leads to a negative cumulative amount that exceeds half the value of subscribed share capital. Share capital includes, where relevant, any share premium.

If your company has negative retained earnings or accumulated losses, you will need to confirm these do not exceed half the value of your share capital in order to be compliant.

Who does it affect?

All companies over three years old.

Why now?

These regulations have been around for a while but have not been widely enforced. However, recently Innovate UK have been cracking down on this.

How do I know if I am at risk?

It is up to applicants to determine if they meet or fail this check.

You will need to check your latest financial accounts. When making an application, applicants must confirm they are aware or the compliance conditions and have confidence they will be compliant by the start of the project.

What happens if I am deemed at risk? Does this mean I am not eligible for support?

Not necessarily.

The Innovate UK finance team will make their decision based on a company’s last published accounts.

If an application is successful but appears to fail the compliance check or more information is needed this will be communicated, and applicants given three months to prove compliance.

This can be as simple as providing updated accounts showing a stronger financial position, or it may require a more complex solution. Unfortunately, if it cannot be resolved you will be ineligible for funding.

What can TBAT do?

We will always make sure prospective clients understand the terms and conditions of grant funding prior to making an application. We can advise clients on our view of their situation; however, we cannot provide a legal opinion. The surest way to check your company is or can be compliant is to check with your accountant.

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